Last updated: October 7, 2022
Last updated: October 7, 2022
The Lifelong Learning Plan is a government plan that lets Canadian residents withdraw from their RRSPs to pay for a full-time education or training program. If you have a disability, you can be enrolled in a part-time program. Under the LLP, you can withdraw up to $10,000 per year to a maximum of $20,000 from your RRSP. You and your spouse or common-law partner can also participate in the LLP at the same time.
Withdrawals from your RRSP typically come with tax consequences. But RRSP withdrawals under the LLP are tax-free – that’s provided you repay the money over a 10-year period.
Yes, you’re required to repay the LLP over a 10-year period, otherwise taxes will apply. The LLP works like a loan (but without interest), where you can borrow money provided you pay it back within a specific timeframe.
You have up to 10 years to repay your RRSPs under the LLP. Generally, for each year, you must repay 10% of the total you withdrew until you’ve repaid the full amount. You don’t have to pay any interest on the money you withdrew.
The Canada Revenue Agency (CRA) will send you an LLP Statement of Account each year with your notice of assessment, showing:
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Only full-time education or training programs qualify under the LLP. Whether the program you select is considered full-time depends how the educational institution you’re enrolled at characterizes your participation. However, if you’re a person with a disability, you can qualify for the LLP if you’re enrolled on a part-time basis.
You can participate in the LLP as many times as you want over your lifetime. This is provided you’ve fully repaid previous LLP withdrawals and your LLP balance is 0.
The LLP isn’t the only way to use your RRSP to pay for your education or training. Here are some alternatives to consider:
Make an early withdrawal from your RRSP. You can make RRSP withdrawals whenever you want and you’ll have to pay taxes on those withdrawals. But if you have little or no income in the year you go back to school, you can make a regular RRSP withdrawal while potentially in a lower tax bracket. And unlike an LLP withdrawal, you don’t have any repayment options. The downside to this approach is that you’re dipping into your retirement savings and limiting its potential growth. Discuss which option is best for you with a tax advisor.
Use your TFSA as an education fund. Or, you could use your tax-free savings account (TFSA) for education costs, because you can withdraw the funds tax-free and carry forward the contribution room. Plus, you’re not required to replace the money in the account.
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